Jim Armitage: Google’s got invention right but is missing the point on tax

Does Google Do The Right Thing, as its catchphrase has it? From the looks of last night’s financial statements: yes and no.

Yes, it is still investing huge amounts researching those so-called moonshots — wild but exciting inventions that could change humanity for the better.

But no, it’s still not paying anywhere near enough corporation tax in the UK.

For a change, let’s look at the positive bit first.

Shareholders had been fretting that Google was wasting too much of their cash on crazy inventions. They demanded more disclosure of what was going on, financially, in those biotech labs and weird divisions creating broadband fibre, internet balloons and driverless cars.

To calm their jitters, the company carved itself in two — splitting apart the cashcow search and advertising side from “other bets”.

I was concerned that the extra scrutiny from Wall Street would scare Google into taking fewer risks. But from last night’s numbers, those worries don’t look justified.

Google ploughed $3.6 billion into moonshots last year. Not only that, but sales coming back from those projects were better than Wall Street feared. So it’s not all being thrown at duds such as Google Glass.

Now for the bad news: tax. The figures don’t strip out UK profit or sales, but we do get up-to-date breakdowns of Google’s global overheads: 38% of sales go on “costs” and 36% on unspecified “operating expenses”.

We also get the global increase in revenues — 18%. Apply those factors to 2014’s UK sales and you get a 2015 profit here of about £1.4 billion.

If it paid the 20% corporation tax other British businesses do, Google would have a bill of around £280 million. Yet Google has said it actually paid only £46.2 million. Nowhere near.

Google says its tax deals break no laws, but that’s slightly missing the point. To cite its new motto: it might be doing the legal thing but that doesn’t make it right.

War and Peace fans will know Russian men love a gamble.

Perhaps some of that rubbed off on BP’s Bob Dudley in the years he spent there running TNK-BP.

Today he’s paying the same dividend as last year despite BP’s thundering losses and increased debts.

Whisper it softly, but the cost of insuring BP’s loans just spiked to its highest since the eurozone crisis in 2011.

Dudley’s divi is based on hopes the oil price will bounce back soon. But it’s the kind of wager even the most feckless count in Tolstoy would balk at.